Tuesday, July 13, 2010

"Conservative Class Warfare"

Some time back I tackled the subject of populism. I was frustrated by the fact that although it was a term that remained largely undefined, it still served for many conservatives as an all-purpose slur directed at just about any movement of the people that resulted in the call for the use of the blunt instrument to simply, and simplistically, "throw the bums out." Insofar as populism was characterized chiefly by resentment, I understood completely the slur. But, if it was understood differently, and I maintained that it could be understood differently, then there were times like now when I might actually call myself a populist as well.

While he never uses the word, Ross Douthat does indeed bring a richer understanding of the populist phenomenon. His focus is on forcing the affluent to actually pay the full price for their financial mistakes.

The left-wing instinct, when faced with high-rolling irresponsibility, is usually to call for tax increases on the rich. But the problem, here and elsewhere, isn’t exactly that we tax high rollers’ incomes too lightly. It’s that we subsidize their irresponsibility too heavily — underwriting their bad bets and bailing out their follies. The class warfare we need is a conservative class warfare, which would force the million-dollar defaulters to pay their own way from here on out.

Subsidizing the taking of foolish risks, not to mention underwriting failure itself, not only introduces the problem of moral hazard, it's just bad business. We're paying for it now and apparently will continue to do so for as far as the eye can see.

But it's more complicated than that. If we subsidize a poor or working class individual's purchase of a small first home, even if the risk is great, the size of the note we collectively hold is relatively small. As a result, the consequences to the country of their failure to pay is relatively small as well. But, if we subsidize the much larger purchases of a middle or upper-middle class individual, a second-home condo on Miami Beach, for example, then we're on the hook for a much larger note if they fail to pay. And that, spread across the entire country, is precisely what has happened.

Now if that be populism, with the resultant class warfare, then hand me a pitchfork.